The MOOC value proposition is that they can eliminate variable costs of course delivery. Image: ©, 2014
The MOOC value proposition is that MOOCs can eliminate the variable costs of course delivery. Image: ©, 2014

The story so far

This is the fifth in a series of posts from my open textbook, Teaching in a Digital Age. I have already published four extracts from the book on MOOCs:

In this post, I examine their value for branding, and their costs.


Hollands and Tirthali (2014) in their survey on institutional expectations for MOOCs, found that building and maintaining brand was the second most important reason for institutions launching MOOCs (the most important was extending reach, which can also be seen as partly a branding exercise). Institutional branding through the use of MOOCs has been helped by elite Ivy League universities such as Stanford, MIT and Harvard leading the charge, and by Coursera limiting access to its platform to only ‘top tier’ universities. This of course has led to a bandwagon effect, especially since many of the universities launching MOOCs had previously disdained to move into credit-based online learning. MOOCs provided a way for these elite institutions to jump to the head of the queue in terms of status as ‘innovators’ of online learning, even though they arrived late to the party.

It obviously makes sense for institutions to use MOOCs to bring to a much wider public their areas of specialist expertise, such as the University of Alberta offering a MOOC on dinosaurs, MIT on electronics, and Harvard on Ancient Greek Heroes. MOOCs certainly help to widen knowledge of the quality of an individual professor (who are usually delighted to reach more students in one MOOC than in a lifetime of on-campus teaching). MOOCs are also a good way to give a glimpse of the quality of courses and programs offered by an institution.

However, it is difficult to measure the real impact of MOOCs on branding. As Hollands and Tirthali put it:

While many institutions have received significant media attention as a result of their MOOC activities, isolating and measuring impact of any new initiative on brand is a difficult exercise. Most institutions are only just beginning to think about how to capture and quantify branding-related benefits.

In particular, these elite institutions do not need MOOCs to boost the number of applicants for their campus-based programs (none to date is willing to accept successful completion of a MOOC for admission to credit programs), since elite institutions have no difficulty in attracting already highly qualified students.

Furthermore, once every other institution starts offering MOOCs, the branding effect gets lost to some extent. Indeed, exposing poor quality teaching or course planning to many thousands can have a negative impact on an institution’s brand, as Georgia Institute of Technology found when one of its MOOCs crashed and burned (Jaschik, 2013). However, by and large, most MOOCs succeed in the sense of bringing an institution’s reputation in terms of knowledge and expertise to many more people than it would in any other form of teaching.

Costs and economies of scale

The main value proposition of MOOCs is that they are free to participants. Once again we shall see this is more true in principle than in practice, because MOOC providers may charge a range of fees, especially for assessment. Although MOOCs may be free for participants, they are not without substantial cost to the provider institutions. Also, there are large differences in the costs of xMOOCs and cMOOCs, the latter being generally much cheaper to develop, although there are still some opportunity or actual costs even for cMOOCs.

Once again, there is very little information to date on the actual costs of designing and delivering a MOOC. However, we do know what the main cost factors are in online and distance learning, from previous research by Rumble (2001) and Hülsmann (2003). Using similar costing methodology, I tracked and analysed the cost of an online masters program at the University of British Columbia over a seven year period (Bates and Sangrà, 2011). This program used mainly a learning management system as the core technology, with instructors both developing the course and providing online learner support and assessment, assisted where necessary by extra adjunct faculty for handling larger class enrolments.

Costs of online learning break down into several categories:

  • initial program planning
  • course development
  • course delivery
  • course maintenance
  • institutional overheads.

Within each of these categories, there are sub-categories, such as the cost of instructors, media production and delivery costs, instructional design, and the cost of producing and delivering support materials. Not all costs apply in all circumstances, of course.

I found in my analysis of the costs of the UBC program that in 2003, development costs were approximately $20,000 to $25,000 per course. However, over a seven year period course development constituted less than 15% of the total cost, and occurred mainly in the first year or so of the program. Delivery costs, which included providing online learner support and student assessment, constituted more than a third of the total cost, and of course continued each year the course was offered (see Figure 6.8 below). Thus in credit-based online learning, delivery costs tend to be more than double the development costs over the life of a program.

Figure 6.8: Costs of an online masters program over seven years
Figure 6.8: Costs of an online masters program over seven years (from Bates and Sangrà, 2011, p. 172)

The main difference between MOOCs, credit-based online teaching, and campus-based teaching is that in principle MOOCs eliminate all delivery costs, because MOOCs do not provide learner support or instructor-delivered assessment, although again in practice this is not always true.

We do not have enough cases at the moment to draw firm conclusions about the costs of MOOCs but we do have some data. The University of Ottawa estimated the cost of developing an  xMOOC, based on figures provided to the university by Coursera, and on their own knowledge of the cost of developing online courses for credit, at around $100,000 (University of Ottawa, 2013).

Engle (2014) has reported on the actual cost of five MOOCs from the University of British Columbia. (In essence, there were really four UBC MOOCs, as one was in two shorter parts.) There are two important features concerning the UBC MOOCs that do not necessarily apply to other MOOCs. First, the UBC MOOCs used a wide variety of video production methods, from full studio production to desktop recording, so development costs varied considerably, depending on the sophistication of the video production technique. Second, the UBC MOOCs made extensive use of paid academic assistants, who monitored discussions and adapted or changed course materials as a result of student feedback, so there were substantial delivery costs as well.

Appendix B of the UBC report gives a pilot total of $217,657, but this excludes academic assistance or, perhaps the most significant cost, instructor time. Academic assistance came to 25% of the overall cost in the first year (excluding the cost of faculty). Working from the video production costs ($95,350) and the proportion of costs (44%) devoted to video production in Figure 1 in the report, I estimate the direct cost at $216,700, or approximately $54,000 per MOOC, excluding faculty time and co-ordination support (i.e. excluding program administration and overheads), but including academic assistance. However, the range of cost is almost as important. The video production costs for the MOOC which used intensive studio production were more than six times the video production costs of one of the other MOOCs.

There is also clearly a large opportunity cost involved in offering xMOOCs. By definition, the most highly valued faculty are involved in offering MOOCs. In a large research university, such faculty are likely to have, at a maximum, a teaching load of four to six courses a year. Although most instructors volunteer to do MOOCs, their time is limited. Either it means dropping one credit course for at least one semester, equivalent to 25 or more of their teaching load, or xMOOC development and delivery replaces time spent doing research. Furthermore, unlike credit-based courses, which run from anywhere between five to seven years, MOOCs are often offered only once or twice.

However one looks at it, the cost of xMOOC development, without including the time of the MOOC instructor, tends to be almost double the cost of developing an online credit course using a learning management system, because of the use of video in MOOCs. If the cost of the instructor is included, xMOOC production costs come closer to three times that of a similar length online credit course, especially given the extra time faculty tend put in for such a public demonstration of their teaching in a MOOC. The full cost of an xMOOC then seems to be currently around $100,000, but we really need some good, reliable data to substantiate this estimate. There is no reason though why xMOOCs could not use cheaper production methods, such as an LMS instead of video, for content delivery, or using and re-editing video recordings of classroom lectures via lecture capture.

Without learner support or academic assistance, though, delivery costs for MOOCs are zero, and this is where the huge potential for savings exist. The issue then is whether MOOCs can succeed without the cost of learner support and human assessment, or more likely, whether MOOCs can substantially reduce delivery costs through automation without loss of quality in learner performance. There is no evidence to date though that they can do this, and prior research on the importance of instructor presence for successful online credit programs suggests that learner support and assessment remain a major challenge for MOOCs.

In terms of sustainable business models, the elite universities have been able to move into xMOOCs because of generous donations from private foundations and use of endowment funds, but these forms of funding are limited for most institutions. Coursera and Udacity have the opportunity to develop successful business models through various means, such as charging MOOC provider institutions for use of their platform, by collecting fees for badges or certificates, through the sale of participant data, through corporate sponsorship, or through direct advertising.

However, particularly for publicly funded universities or colleges, most of these sources of income are not available or permitted, so it is hard to see how they can begin to recover the cost of a substantial investment in MOOCs, even with ‘cannibalising’ MOOC material for on-campus use. Every time a MOOC is offered, this takes away resources that could be used for online credit programs. Thus institutions are faced with some hard decisions about where to invest their resources for online learning. The case for putting scarce resources into MOOCs is far from clear, unless some way can be found to give credit for successful MOOC completion.


I hope to wrap up what has turned out to be a whole chapter on MOOCs in my next post in this series, which will analyse the political and economic reasons behind the rapid development of MOOCs, and which will also provide some brief conclusions about MOOCs as a design model.


1. I am very conscious of the limited amount of data on either the success of MOOCs for branding, or in particular the true costs of developing and delivering MOOCs. So any information on the cost of MOOCs that you can provide or direct me to will be very much appreciated.

2. Has anyone attempted to measure the value of MOOCs for ‘branding’ a university or college? How would you do this?

3. Is it reasonable to compare the costs of xMOOCs to the costs of online credit courses? Are they competing for the same funds, or are they categorically different in their funding source and goals? If so, how?

4. Could you make the case that cMOOCs are a better value proposition than xMOOCs – or are they again too different to compare? In particular has anyone got data on the true cost of cMOOCs? How would you cost them?

As always, feedback, criticisms and comments are welcome.


Bates, A. and Sangrà, A. (2011) Managing Technology in Higher Education San Francisco: Jossey-Bass/John Wiley and Co

Engle, W. (2104) UBC MOOC Pilot: Design and Delivery Vancouver BC: University of British Columbia

Hollands, F. and Tirthali, D. (2014) MOOCs: Expectations and Realities New York: Columbia University Teachers’ College

Hülsmann, T. (2003) Costs without camouflage: a cost analysis of Oldenburg University’s  two graduate certificate programs offered  as part of the online Master of Distance Education (MDE): a case study, in Bernath, U. and Rubin, E., (eds.) Reflections on Teaching in an Online Program: A Case Study Oldenburg, Germany: Bibliothecks-und Informationssystem der Carl von Ossietsky Universität Oldenburg

Jaschik, S. (2013) MOOC Mess, Inside Higher Education, February 4

Rumble, G. (2001) The costs and costing of networked learning, Journal of Asynchronous Learning Networks, Vol. 5, No. 2

University of Ottawa (2013) Report of the e-Learning Working Group Ottawa ON: The University of Ottawa


  1. I’m currently finishing dissertation On disruptive innovation in higher Ed. I think it would be helpful to categorize on fixed cost and marginal cost and average cost per student. The real competitive advantage of moocs is the low marginal cost per student

    • Both Muvaffak and Andrew make a good point about average cost per student, and of course if you charge a small fee it is possible to make a profit. My point though is that publicly funded universities are funded to provide recognised qualifications. If they are not willing to give full accreditation to students taking MOOCs, they just become a profit-making organization, which, in many countries, would be a breach of their charter/constitution.
      Many public universities run cost-recoverable for credit online programs that give full accreditation, but they have a much higher level of learner support than MOOCs, and much higher completion rates (and also much higher fees). The argument is not about online learning, but whether MOOCs are the best form of online learning. They are for informal, continuing education but not for students who want full accreditation and recognition for their studies. Until then, it is hypocritical of the President of Stanford to claim they are as good as on-campus courses.
      In the end, it comes down to standards. I’m not convinced that MOOCs can deliver on the high level academic standards, because of their lack of interaction between subject matter expert and student. If they can meet these standards through automation (which I think is unlikely except perhaps in the quantitative sciences), then institutions need to recognise them for credit.

  2. Dear Tony
    I am an engineer. I am much for familiar with cost accounting with 25 years experience. Plus To make feasibilties .
    Simple rule, even I call it natural law is SUPPLY AND DEMAND
    If you have brand then you have demands already and you can supply at almost any price .
    Please look up MIT Stanford Harvard. Demand is 100,000-200,000 per year and accepted 5 to 9 % of it .
    Why because of brand . Because of brand they can charge anything and they do . At least they are honost they do not overcharge .
    Regarding online accountinmg .
    It is an investment Project .
    1 .- Nonrecurring costs :
    You have very high investment that is development cosgt ( I spent $ 1 million for K12 courses lasting 35 weeks )
    We would like to get our investment back in 5 years .
    I would say for a 15 weeks long course it is $ 500,000 . MIT declared that as $ 250,000
    My figüre includes $ 125,000 paid to professor as intellectual proporty righs fee . $ 250,000 teaching labor of professors for 6 months , and $ 250,000 to 5 technicians with software design for 6 months .
    2.- Recurring costs
    Instructors supervision ( for 15 weeks at $ 5,000 per week )
    Mentors helping ( 2 adjuncts at $ 300/week or $ 5,000 per course of 15 weeks , total $ 10,000 )
    Platform cost ( This is less than $ 1 . It depends how you bargain )
    Annual updating costs ( 10 % of the total development cost $ 50,000 per year per course )
    University’s overhead ( 10 % of the income from the course )

    Now we come to enrollment. Even the initial costs are high if enrollment is high, per person per course is so small
    Assume 1,000 enrollment per course per semester .
    Then development course per student is 500,000/10 semester/1000 students = $ 50
    If you have 2,000 student it is onlt $ $ 25 per course per person .
    Instructors cos 15 weeks x 5,000 /1,000 = $ 75 per person per course
    If you have 2,000 students then it is $ 37 .
    Mentors 2 mentors x15 weeks x $ 300 / 1,000 = $ 9
    İf you have 2,000 then it is only $ 5 .
    Updating $ 50,000 / 2 / 1000 = $ 25
    If 2,000 students that is $ 12 .

    If you charge $ 200 per course income per semester $ 200 x 1,000 = $ 200,000
    Then overhead is $ $ 20,000
    If you have 1,000 students per student overhead is $ 20,000 / 1,000 = $ 20

    Development $ 50
    Instructors $ 75
    Mentors $ 9
    Updating $ 25
    Platform $ 1
    Overhead $ 20
    Total is $ 179
    If you have 2,000 students then cost is $ 90

    But you sell it at $ 200 Good profit
    Please give me your ema,il. I will send you an excell sheet

  3. It seems I have been reaching to my dreams .
    Georgia Tech started an onkline MS program for CS
    They charge $ 550 per course . It is 15 % of the f2f price .
    It is still expensive. But all right. It is just a beginning .
    You see my calculation s.
    The enrollees like the course very much . That is also good news .
    Now I promote it globally too . I will add a banner in my web sites

    One thing I was saying has been said by Dean Zv,i GALIL
    ” We have the same course oncampus at Georgia Tech same quality by same professors ”
    That is what it should be .

    They also select students they do not accept everybody . Then they will be successful .
    So far from spring 2014 to today retention is 92 %

    Let us all promote it .


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